Associated Bank earnings increase 21% in Q3

Acquisition expenses ding Bank Mutual

The Milwaukee Associated Banc-Corp offices.

The parent companies of Associated Bank and Bank Mutual this week reported their third quarter earnings as they move forward with their merger plans.

The Milwaukee Associated Banc-Corp offices.

Green Bay-based Associated Banc-Corp reported third quarter net income of $65 million, or 41 cents per share, up 21 percent from $53.8 million, or 34 cents per share, in the third quarter of 2016.

Net interest income was $190.1 million, up from $178.5 million in the year-ago quarter. Though interest expense increased 99 percent, total interest income was up 16 percent, driven by higher interest and fees on loans.

Noninterest income was $85.9 million, down from $95.2 million in the third quarter of 2016. Mortgage banking income fell 64 percent, to $6.6 million, from the same period a year ago.

Associated significantly decreased its provision for loan losses, which was down 76 percent year-over-year, to $5 million.

Meanwhile, Brown Deer-based Bank Mutual Corp. reported third quarter net income of $3.8 million, or 8 cents per share, down from $4.5 million, or 10 cents per share, in the third quarter of 2016.

The company’s net interest income was $19.7 million, up from $18.7 million, driven by higher loan income.

Non-interest income was $5.3 million, down from $6.9 million in the year-ago quarter. Bank Mutual brought in less mortgage banking revenue and loan-related fees, and recorded a $197,000 net loss on the sale of retail branch offices, loans and deposits during the quarter.

Bank Mutual also decreased its provision for loan losses, from $1.4 million in the third quarter of 2016 to $472,000 in the most recent quarter.

“Associated continues to benefit from its strong customer deposit franchise,” said Philip Flynn, president and chief executive officer. “According to recently released FDIC 2017 Summary of Deposit data, Associated increased its deposit market share across its footprint and grew deposits by 10 percent in our Wisconsin market. Customer deposits and funding, excluding network deposits, increased by a net 8 percent from the prior year and funded all of our year-over-year growth. The quarter further benefited from strong credit quality dynamics, lower provision, and improving efficiency. We remain committed to delivering year-over-year mid-single digit annual average loan growth, an improving net interest margin and expense growth of less than 1 percent.”

Flynn also said Associated has been moderating its commercial real estate portfolio growth, since it will take on about $1 billion in CRE exposure once the acquisition closes.

The merger is still expected to be approved in time for a first quarter 2018 completion, he said. Next week, Bank Mutual shareholders will vote on the transaction.

“We also continue our integration planning and we remain on track with the timeline we outlined during the last earnings call,” Flynn said. “We look forward to closing the transaction and welcoming Bank Mutual’s customers to Associated early next year.”

“Excluding the after-tax effect of $1.3 million in expenses related to our pending merger with Associated, our earnings would have increased slightly in the third quarter of 2017 compared to the same quarter last year,” said David Baumgarten, president and chief executive officer of Bank Mutual. “We continue to be pleased with the year-over-year growth in our loans and the expansion of our net interest margin, although we continue to struggle a bit with our sources of non-interest income, which has declined in 2017. We remain on track with efforts to complete our pending merger with Associated and we are looking forward to next week’s shareholder meeting on this important matter.”

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Molly Dill
Molly Dill, former BizTimes Milwaukee managing editor.